You choose the car; the finance company pays the dealer. You then hire the car from the finance company, taking responsibility for it and making monthly payments until you have paid the total amount owed. At the end of the repayment period, you have the option to take ownership of the car.
- Fixed Monthly Repayments – Yes
- Repayment periods available – Usually 12–60 months
- Deposit Recommended – A deposit of at least 10% is recommended but in some cases is not compulsory
- Best for – People who want to own their own car in the long term and can’t get or don’t want a personal loan.
Who owns the car?
The finance company owns the car during the repayment period. If at the end of the term you take up the option to purchase, the car becomes legally yours. As you’ve paid off the cost of the car by this point, all you pay is a small admin fee. This is typically between €50 and €100.
Flexibility to sell/pay off early
You can end the agreement early by paying the total due. The car is then yours to sell. There may be a charge for early repayment, but you will save on interest.
Getting behind with payments
Fall behind with payments, and the finance company can take the car back. They will sell it and use the money to repay your debt. If they don’t get enough, you will have to pay the difference plus any court costs.
If you have paid (or can pay) 50% of the total owed, you can choose to give the car back. You will have to pay for any missed installments due up to the time you end the agreement. You may also find it harder to get credit after.
What’s most important is to plan what you can afford before deciding what to borrow. Set the repayments at a level you’re comfortable with, and HP should be simple and trouble-free.